AOL Wagers Big on Arianna Huffington

AOL Inc.’s deal to purchase the Huffington Post is more than a bet on the website’s financial prospects. It’s a wager on the ability of co-founder Arianna Huffington to build an online media empire, analysts say.

Under the $315 million acquisition agreement, Huffington, 60, will join AOL and become president and editor-in-chief of a newly formed media group. In the position, she’ll oversee all of New York-based AOL’s content, from the TechCrunch blog to the Patch local news sites to new content initiatives.

While the goal is to help AOL become a more powerful force in online advertising, there’s a risk in putting Huffington in charge of editorial, said Rob Enderle, a San Jose, California- based technology consultant. Her political views, often critical of corporations and Republicans, may be polarizing, he said.

Still, Huffington may be able to help AOL build a media organization with a distinct and successful voice similar to the approach News Corp. has used with Fox News, Enderle said.

“Yes, she’s got political views, but gosh, look how political views have worked for Fox,” Enderle said in an interview. “There’s certainly the opportunity to create a much more powerful liberal voice in the country. The fact that it hasn’t been done yet, doesn’t mean it can’t be done.”

Huffington’s views have alienated advertisers in the past. In 2001, FedEx Corp. and Sears, Roebuck & Co., now part of Sears Holdings Corp., pulled their advertising from ABC television’s “Politically Incorrect” after Huffington and host Bill Maher described past U.S. military actions as cowardly.

AOL declined 75 cents, or 3.4 percent, to $21.19 in New York Stock Exchange composite trading yesterday. The shares have declined 11 percent this year.

AOL Chief Executive Officer Tim Armstrong is turning to Huffington as his company struggles with declining revenue in both its advertising and Internet-access subscription businesses. The company this month reported 2010 revenue fell 26 percent to $2.42 billion.

The acquisition will create a company with about 270 million unique visitors a month worldwide and 117 million in the U.S., AOL said in a statement. AOL also owns MapQuest, Moviefone and the Engadget technology blog.

“I have to hand it to Tim Armstrong,” said George Bell, CEO of Jumptap Inc., a mobile ad company based in Cambridge, Massachusetts. “It’s probably time to get aggressive. Why not shoot the moon on content? The advertisers want to go where the quality audiences are, especially in display.”

Huffington has agreed to a multiyear deal at AOL, though the exact length was not disclosed.

“Arianna is a star, and she’s our main attraction,” Armstrong said in an interview on Bloomberg Television. “We have to go beyond left and right, and I think Arianna has been pushing the Huffington Post the last couple of years.”

Born Arianna Stassinopoulos in Greece, Huffington moved to England at 16 and graduated from Cambridge University with a degree in economics, according to the biography on her company’s website. She became president of the Cambridge Union debating society at 21, according to the biography.

Her book “The Female Woman,” on the changing role of women, was published in 1974. She later wrote biographies of painter Pablo Picasso and opera singer Maria Callas. More recently, she has written books about politics, including 2010’s “Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream.”

She took her current name after marrying Michael Huffington, the son of a wealthy energy entrepreneur. Michael Huffington was elected as a Republican congressman from California, and his wife became an outspoken supporter of Republican causes. Michael Huffington lost a campaign to unseat U.S. Senator Dianne Feinstein in 1994, and then revealed in a news article printed in Esquire magazine that he was gay.

After the couple divorced in the late 1990s, Huffington shifted her support to Democrats. In 2003, she ran for California governor, advocating for closing tax loopholes and conserving energy. When she dropped out of the race, she said she would spend “every ounce of time” trying to defeat Arnold Schwarzenegger, who was elected governor that October.

Huffington raised $2 million with New York-based angel investor Ken Lerer to start Huffington Post in 2005. The website began as a political forum and has expanded to 26 sections, including sports, business, entertainment and travel.

Huffington Post raised about $35 million in venture capital from firms including Greycroft Partners LLC, founded by Alan Patricof. Most of the last round of $25 million, led by Oak Investment Partners, remained in the bank in December, Huffington said in an interview at that time. The company declined to say how much equity Huffington now holds.

If Arianna Huffington continues to draw traffic and can boost the unique visitors at AOL’s Web properties, then advertisers may not care about her political views, said Joel Hollander, the former CEO at CBS Corp.’s CBS Radio.

“If they have a lot of visitors to the site, people will advertise,” said Hollander in an interview.